Business

Fast Retailing's Uniqlo To Raise Prices 5% in Japan

Fast Retailing Co Ltd will raise prices by around 5% at its Uniqlo casual clothing stores in Japan due to rising procurement costs and a weaker yen - a long awaited move that should help shore up profit margins.

Uniqlo had held back from raising base product prices fearing a fall in sales given its reputation of offering affordable clothing, but declines in profitability at home have been a key source of concern for investors.

Japan's sales tax was also hiked to 8% from 5% on April 1, and companies have been on edge about a slump in demand. Same-store sales at Uniqlo's Japanese operations, however, rose 3.3% in April and 4.1% in May from the year before, alleviating those concerns. Uniqlo's price hikes are set to go into effect from its autumn and winter collections.

In addition to a global rise in the price of textile fibres and a weaker yen, Uniqlo faces higher labour costs in the near term as it plans to hire about 16,000 regular staff in Japan. That will include hiring of some its part-time workers, who currently receive little or no benefits.

Uniqlo's domestic operating profit margin is set to fall for a fourth straight year, from 21.4% in 2009/2010 to an estimated 13.7% in the business year ending this August, according to Deutsche Securities analyst Takahiro Kazahaya. Overall operating profit for Fast Retailing, which also includes apparel brands such as Theory and GU, is projected to set another record in the year to August driven by a rapid expansion overseas, mainly in Asia.